April 18, 2024

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[THE INVESTOR] Anxiety built up among Korea’s steel manufacturers over the weekend, following the latest signals from the United States to drastically increase the tariff rate for steel imports as part of President Donald Trump’s trade protectionist policy.

While figuring out a countermeasure, companies complained that the suggested action plan was not only excessive but also unfair as it unaccountably excluded some of the top steel exporting nations to the US.

The Ministry of Trade, Industry and Energy on Feb. 17 held an emergency council with key steelmakers at Seoul’s Korea Technology Center under the presidency of Minister Paik Un-gyu, concerning Washington’s incoming trade restrictions for steel and aluminum, according to officials.

The meeting, held during the Lunar New Year national holiday, was attended by most of the top-level officials of the local steel industry including Posco Chairman Kwon Oh-joon, Hyundai Steel CEO Kang Hak-seok, and Korea Iron & Steel Association Vice Chairman Song Jae-bin.

“The private and public sectors shall work together to maximize contact with the US government, Congress and the (steel) industry until the final decision is made,” the ministry said in a release.

“We shall also analyze the consequences of each scenario and figure out a respective contingency plan for every possibility.”

The US Department of Commerce announced Friday that it recommended that President Trump impose new tariffs on steel imports, based on Section 232 of the Trade Expansion Act of 1962. The given clause allows the state chief to impose restrictions on trade, should certain practices be considered a threat to national security.

“Imports threaten to impair our national security,” US Commerce Secretary Wilbur Ross told reporters upon the statement, according to the Wall Street Journal.

The report suggested three options -- a global tariff on steel of 24 percent, a tariff of 53 percent or more on a dozen specified countries including South Korea, or a quota limiting individual countries’ steel imports to 63 percent of their exports in the previous year.

Weighing the most pressure upon South Korean steelmakers was the second scenario, especially as its conditions are largely stacked against China and countries that import Chinese steel.

Observers especially pointed out that several of the top 20 steel exporters to the US such as Canada, Japan, Germany, Taiwan, Mexico and Russia were excluded from the extra tariff list, without explicit reason.

According to the Department of Commerce data, South Korea stood third in amount of steel exports to the US, accounting for 10.2 percent as of the end of October last year.

“We are currently analyzing the reasons but it seems that the list (for steeper steel tariffs) mostly included countries that not only export heavily to the US but also import considerably from China,” said an official of the trade ministry.

China immediately lashed back, vowing to retaliate if the proposed tariffs are to be imposed.

“If the final decision impacts China’s interests, China shall take necessary measures to protect its own rights,” Wang Hejun, chief of the trade remedy and investigation bureau at China’s Ministry of Commerce, said in a statement.

The US president has until April 14 to determine his course of action on steel imports but already gestured at his possible approval by telling lawmakers last week that “substantial tariffs” are a possibility.

The Trump administration has been gesturing at reinforcing trade regulations in order to foster the reeling domestic manufacturing industries, in spite of concerns from economists that such tariff policies could backfire and consequently trigger heavier restrictions on US exports, or even lead to a trade war.

By Bae Hyun-jung/The Korea Herald (tellme@heraldcorp.com)